Wine Villages Draw Traffic

Washington wineries take advantage of the cluster effect to attract visitors and manage costs

by Peter Mitham

The team from Gordon Brothers Family Vineyards opted to open a tasting room in Western Washington's bustling wine center Woodinville, rather than at their isolated vineyard and winery near Pasco, in Central Washington.Marketing director Katie Nelson (back row, second from right), explains the reasoning behind their choice.

Woodinville, Wash. -- Woodinville has garnered more than 40 wine studios and tasting rooms in recent years, creating a hub for Seattle-area residents and visitors seeking to explore the Washington State wine industry. Like urban winery centers throughout the West Coast, Washington producers have learned that being surrounded by vineyards is not a prerequisite for attracting wine consumers thirsty for the tasting room experience.

Indeed, when Gordon Brothers Family Vineyards of Pasco, in Central Washington's Tri-Cities wine axis, wanted to open a tasting room as part of a plan to boost its exposure, it didn't choose an inland location, but went west of the Cascades. Gordon Brothers produces about 25,000 cases of wine annually from estate-grown grapes, one of a handful of Washington producers with the capacity to do so. The wines enjoy distribution across the United States, including Guam, as well as limited sales in Canada, Denmark, Japan and Korea.

But tapping the "local" market made more sense in Woodinville, where Gordon Brothers leases space in an industrial park that's home to a couple of dozen other wineries. Although it's only open on weekends, the traffic has been steady since opening two months ago. This weekend, it will host an official grand opening celebration.

"Driving-wise, the nearest winery to us is about 18 miles away," Katie Nelson, marketing director for Gordon Brothers told Wines & Vines during a phone interview from Pasco. "We don't have the luxury of that cluster effect here. We've got a great following here in town, but for us to have a tasting room at the winery just isn't feasible."

That Woodinville is close to the largest concentration of people in the state, and also one of the most affluent--the bustling headquarters of Microsoft Corp. in Redmond is just minutes away--means the kind of buyers Gordon Brothers hopes to attract are more likely to stop in. "We get more consumers per dollar that we spend on overhead," Nelson said. "Definitely a bigger bang for our buck over there as far as traffic goes."

A similar belief motivated Prosser-based Alexandria Nicole Cellars to set up a tasting room in Woodinville last year. Its headquarters are in an industrial park in Prosser, but the traffic is greater at the Woodinville facility. It also allows the winery to better serve members of its wine club.

"It costs more to operate over there, with the rent and everything else, but with our plans and goals and expectations, it'll be a really good space," said Jarrod Boyle, owner of Alexandria Nicole. "My philosophy is you've got to go where the people are. There's 4 million people to choose from on that side of the hill, compared to Eastern Washington."

Moving west of the Cascades is also advantageous as far as sales are concerned, Nelson added. Since tasting room sales are direct to consumers, wineries receive the retail price rather than give the discount distributors require. This translates into an added incentive despite the higher costs.

While travel costs for visitors weren't a factor in the decision to locate in Woodinville, Nelson acknowledged that it could be an important factor given belt-tightening among consumers. Anecdotal evidence from tourism operators in the Tri-Cities area indicates that wine tourism has been flat this year.

Wine villages don't just help boost consumer traffic. Mike Haddox, general manager and a winemaker at the Winemaker's Loft in Prosser in Eastern Washington, developed a 10,000-square-foot facility to accommodate smaller wineries. His facility offers 1,000 square feet to each winery as well as equipment and other support, for $3,600 a month. The rent translates to about $40 per case, Haddox said, while other costs amount to an additional $40-$50 per case.

Since Winemaker's Loft opened in 2006, Haddox has leased six of the seven spaces in the project and is proceeding with plans for a second facility in Yakima, double the size of the Prosser facility. It's set to break ground next spring at the planned Riverpointe Landing development that will bring together a number of commercial tenants.

Haddox' facility, set to open in 2010, will be surrounded by three other wineries on 20 acres of the 100-acre site. While he would love to pursue a similar project west of the Cascades, Haddox said the economics wouldn't necessarily work out.

"It would be hugely successful over there because of the traffic," he said. "The flipside to that is that the cost of land and the cost of doing the project goes up substantially." Haddox paid $30,000 per acre for his 2-acre parcel in Prosser, whereas land prices for similar sites-- highly visible, with highway access--west of the Cascades could easily approach $500,000 per acre a nd up.

That kind of pricing would force him to double the size of his projects in a market some say is becoming saturated, or boost rents to a point that isn't as attractive to fledgling wineries.